lang="en-US"> FATF Global Role - Series of Articles
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Madiha Fatima

Financial Action Task Force - Understanding Of Actual Global Role

Many of us have a common perception that FATF is acting strictly to some nations whereas has a lenient approach towards some other nations and we identify stances where some countries are directly or indirectly involved in provoking extremist or right-wing groups for illegal or terrorist activities in other states but still FATF ignores such activities while deciding their status.

It is true that different nations have different interests and they sometimes operate in enmity of other nations but is it really FATF who is responsible to watch and consider those activities or there are other supranational bodies which are responsible to act on such activities.

Let us first understand what Financial Action Task Force (FATF) is and how it works. As appears from its name, it is a task force mandated with responsibilities of global money laundering and terrorist financing watchdog that sets international standards that aim to prevent illegal activities and the harm they cause to society. It assesses the entire system of anti-money laundering and its framework.

One must understand that every group and every organization needs finance for its operations and survival and the same goes with terrorist non-state actors. These non-state actors act in their own interest and can be used by anyone for any purpose in return for financial benefits. These non-state actors may be identified as groups of militants, extremist influential parties, or independent bodies including NPOs & NGOs. It is in benefit of countries to control and have a close watch on activities of potential non-state actors. Their activities can be controlled if finance generation and its transfers are controlled within the country.

FATF works in collaboration with the United Nations and Egmont Group of Financial Intelligence Units. UN helps it pressurize members to implement the FATF standards effectively whereas Egmont Group provides technical assistance. It assesses the entire system with the financial and control framework of countries to measure the risk of money laundering, terrorist financing, and proliferation financing within their territories. This assessment includes both technical compliance and effectiveness compliance means it reviews laws, regulations and also considers its implementation on the ground through courts and procedures. It also, with the help of pressure from the UN, asks countries to implement required financial and other controls to achieve its objectives.

As a result of evaluations, FATF determines whether a country gets on the grey or blacklist. A country that is not in both the list could be one of those that are found to have the required financial system and framework or they may be from one of those that are not yet subject to review. Till today there are 02 countries that are blacklisted and 19 countries that are on the gray list.

Blacklisted countries are officially known as Non-Cooperative Countries or Territories (NCCTs). These countries are subject to economic sanctions and other prohibitive measures by FATF member-states and other international organizations like IMF, World Bank, and ADB. The first FATF blacklist was issued in the year 2000 with an initial list of 15 countries but presently only Iran and North Korea are on the Blacklist.

The grey list contains a set of countries whose financial sectors have strategic AML/CFT weaknesses due to inadequate regulations, enforcement, or both. Enlistment on the grey list or blacklist can have a detrimental effect on an economy. The impact of inclusion in the gray list may vary depending on the reasons for inclusion and may lead to economic sanctions from the International Monetary Fund, World Bank, and Asian Development Bank making it problematic in securing financial assistance from these organizations and other countries. In addition to this, as a result of inclusion into blacklist or gray list, disadvantages may extend to reduction in international trade, reduction of trust in the country’s financial institutions, reduction in foreign investment & aids, deficit of payment and trade, worsen money and equity market, etc.

After a brief understanding of what is FATF and how it works, it can be said that it is not in the ambit of FATF to consider how a country is dealing with its hostile states or how it reacted in war-like conditions. It mainly considers the laws and regulations and their implication related to anti-money laundering, terrorist financing, or proliferation financing. This has also been numerously communicated from the responsible offices of FATF that it is not an investigative agency, to watch and control the activities of direct or indirect involvement of countries in destabilizing other governments. It is simply a global task force with a limited mandate to watchdog anti-money laundering, terrorist financing, and financing for proliferation globally.

As far as its performance is concerned, it is appreciated not only by a few continents and states but by all the G20 leaders in November 2020. They have reaffirmed their support for the FATF as the global standard-setting body to prevent money laundering, terrorist financing, and proliferation financing.

The responsibility to monitor and control interstate matters like terrorism, war crimes, etc. are of United Nations, but we have seen many stances where its actions are not sufficient enough to control and resolve the issue amicably and with justice. We are recently observing the issue of Palestine and Israel where the UN is not performing its role fully and this is because of the fact that some members have powers to veto any decision of the majority and this veto power is given without the need of any explanation or consequences on part of country exercising veto.

We need a global platform that is designated only towards immediately resolving life-threatening conflicts and that platform should act prior to the loss of precious lives of the innocent public without any discrimination.

Prepared and Researched by

Madiha Fatima

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